Individual savings, including retirement savings, has been greatly impacted by the growth of the stock market and retirement plans that offer individual unmanaged accounts. Both of these recent phenomena generally require the investor to determine how much to save and how to invest those savings, including allocating the savings in the investor's individual savings or similar account between various types of asset classes. Investors, including retirees, have many software options available to assist them with investment planning. For example, some software used in retirement planning allows the user to enter the appropriate information (e.g., a user's age, current income, assets, retirement goal, etc.) and the program may output a general list of things the user can do to reach the desired goal, e.g., save more now, change investments, retire later, work part-time, etc. Some software programs also recommend allocations of savings between various investment products based on the investor's individual goals.
An investor can select many different investment products for a retirement portfolio. One investment vehicle is common stock, which has the potential to produce high returns. Unfortunately, the value of stock and equities in general can be volatile, and losses due to this volatility may severely impact retirement savings. Investments in cash equivalents, such as in money market accounts or certificates of deposit, are far less volatile, but yields may be unacceptably low. An asset allocation made up of stocks, bonds, real estate, cash equivalents and other asset classes may therefore be desirable for some investors to minimize volatility while maintaining acceptable returns.
Another type of asset that can be purchased for retirement is an annuity. Annuities are available in many forms, e.g., deferred variable annuities, fixed deferred annuities, deferred income annuities, variable immediate annuities and fixed immediate annuities. A fixed immediate annuity is a well-known financial vehicle offered by insurance companies that is used to pay a person a certain sum of money in a series of distributions or income payments made at regular intervals, typically monthly, quarterly, or annually, starting at a given date, based on a given amount of principal from an initial contribution of assets, commonly known as premium. Income annuities are available in many forms as noted above. The distributions may be made, for example, for a predetermined definite period, as in an annuity certain, or for as long as the person lives, as in a life annuity.
Unfortunately, using financial planning software to select allocations of stocks, bonds, or other investment products has its shortcomings. For example, the investor who utilizes this type of financial planning software is forced to play a guessing game, that is, the investor must select an investment option that the investor hopes will provide a desired return. Should the investor choose incorrectly, then the investment might not provide the desired amount of return for the investor. Additionally, the investor is at risk from the vagaries of the market, such as a market correction that has the potential of erasing a significant portion of the investment assets. Certain types of annuities may provide more certainty than securities, but often the reasonable return that annuities provide is exchanged for the potential for high returns associated with securities.
Therefore, there exists a need for an investment system and corresponding methods performed by the system that are not so limited.